Dipak Kumar Sen, J.
1. This reference arises out of the income-tax assessment of Alkali & Chemical Corporation of India Ltd., Calcutta, the assessee, in the assessment year 1971-72, the accounting year ending on September 30, 1970.
2. On an application of the assessee under Section 256(1) of the Income-tax Act, 1961, the following questions have been referred, as questions of law arising out of the order of the Tribunal, for the opinion of this court:
'Question No. 1.--Whether, on the facts and in the circumstances of the case and on a proper interpretation of the Income-tax Act, the Tribunal was right in upholding the allowance of interest paid by the assessee to the extent of Rs. 1,63,386?
Question No 2.--Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the disallowance of the assessee's claim of Rs. 18,653 for depreciation ?'
3. On an application of the Revenue also under Section 256(1) of the Income-tax Act, 1961, the following questions have been referred, as questions of law arising out of the order of the Tribunal, for the opinion of this court:
'Question No. 1.--Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 13,645 representing reimbursements of medical expenses to the employees was not an expenditure resulting directly or indirectly in the provision of any benefit or amenity or perquisites to the employees within the meaning of Section 40(a)(v) of the Income-tax Act, 1961 ?
Question No. 2.--Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that borrowed moneys should be included in the capital employed for the purpose of computing the relief under Section 80J of the Income-tax Act, 1961, in respect of the new industrial undertaking?'
4. So far as question No. 2 referred at the instance of the assessee is concerned, the same appears to be covered by Section 35(2)(iv), which was amended by the Finance Act, 1980, with retrospective effect from 1st April, 1962. The legal position following the amendment of the said section is not disputed by the assessee. Accordingly, we answer question No. 2 in the affirmative and in favour of the Revenue.
5. The controversy raised in question No. 1 referred at the instance of the Revenue is also covered by the several decisions of this court, namely :
(a) CIT v. Kanan Devan Hills Produce Co. Ltd. : [1979]119ITR431(Cal) ;
(b) Indian Leaf Tobacco Development Co. Ltd. v. CIT : [1982]137ITR827(Cal) ;
(c) CIT v. National & Grindlays Bank Ltd. : [1984]145ITR457(Cal) ; and
(d) CIT v. Alkali & Chemical Corporation of India Ltd. : [1986]158ITR58(Cal) .
6. Following the said decisions, we answer the question in the affirmative and in favour of the assessee.
7. Question No. 2 referred at the instance of the Revenue is also covered by the decision of the Supreme Court in Lohia Machines Ltd. v. Union of India : [1985]152ITR308(SC) . Following the said decision, we answer the question in the negative and in favour of the Revenue.
8. On question No. 1 referred at the instance of the assessee, the facts found or admitted are, inter alia, as follows :
9. The assessee had an overdraft account with the National & Grindlays Bank Ltd. in which all receipts were deposited and from which payments on account of taxes and other expenses including capital expenditure, dividends, etc., were made and incurred. There was a continuous debit balance in the account. The Income-tax Officer disallowed a part of the interest paid by the assessee on the said overdraft on the ground that a part of the overdraft had been utilised for the payment of income-tax.
10. On appeal, it was found by the Appellate Assistant Commissioner that during the month of October, 1969, the opening debit balance was Rs. 1.58 crores and there were further withdrawals to the extent of Rs. 1.57 crores. Receipts deposited in the account during the said month were Rs. 0'83 crores. In October, 1969, Rs. 83,570 was paid out of this account for income-tax.
11. It was found further that in the month of December, 1969, against the deposits of Rs. 1.33 crores there were withdrawals of Rs. 1.31 crores and during the said month Rs. 29.62 lakhs was paid through this account for income-tax. In the month of July, 1970, as against the collection of Rs. 1.33 crores there were withdrawals aggregating to Rs. 1.80 crores and inthe said month, Rs. 1.54 lakhs was paid from the account on account of income-tax.
12. On such facts, the Appellate Assistant Commissioner upheld the decision of the Income-tax Officer in disallowing the deduction of a part of the interest paid by the assessee in respect of the said overdraft.
13. On a further appeal by the assessee, the Tribunal held that in the facts, the Appellate Assistant Commissioner was justified in disallowing a part of the interest claimed in respect of the overdraft utilised for payment of taxes.
14. At the hearing before us, the learned advocate for the assessee submitted that the controversy raised in the question was covered by several, decisions of this court. He cited Woolcombers of India Ltd. v. CIT : [1982]134ITR219(Cal) , where it was held that where profits were sufficient to meet the liability to pay advance taxes and that the entire profits had been deposited in the overdraft account of the assessee from which payments were made towards advance taxes, it should be presumed that such taxes were paid out of the profits of the year and not out of the account by way of overdraft, which was held to have been obtained for running the business. It was held that interest paid by the assessee on the overdraft should be allowed as an admissible deduction.
15. Reckitt and Colman of India Ltd. v. CIT : [1982]135ITR698(Cal) . In this case, the earlier decision in Woolcombsrs of India Ltd. : [1982]134ITR219(Cal) was followed and applied.
16. Indian Explosives Ltd. v. CIT : [1984]147ITR392(Cal) . In this case also it was held, following the earlier decisions of this court in Wool-combers of India Ltd.'s case : [1982]134ITR219(Cal) and Reckitt and Colman of India Ltd.'S CASE : [1982]135ITR698(Cal) that the disallowance of interest paid by the assessee from a common overdraft account was unjustified.
17. Learned advocate for the Revenue contended, on the other hand, that if money has been borrowed for payment of income-tax, interest paid on the same was not an allowable deduction. The same position obtained if tax was paid from an overdraft account with a debit balance. Learned advocate submitted that this point had not been decided against the Revenue in any of the decisions cited on behalf of the assessee.
18. It appears to us that, in the instant case, the net profit of the assessee in the relevant accounting year exceeded the income-tax paid by the assessee. This will appear from the order of assessment itself. It is also undisputed that the entire profits of the assessee during the relevant accounting year were deposited in the overdraft account from which all expenditure of the assessee including that on account of payment ofincome-tax were incurred. In that view, the decisions cited on behalf of the assessee apply on all fours to the facts before us. We are not laying down that if money is borrowed either directly or through an overdraft account for payment of income-tax, the interest paid for the same would be a deductible expenditure. All that we are holding is that if money has been deposited by the assessee out of its profits in an overdraft account from which all payments including income-tax are made, the fact that the said overdraft had a continued debit balance would make no difference to the presumption that the income-tax had, in fact, been paid out of the profits and not out of the borrowings.
19. For the reasons as above, we answer question No. 1 returned at the instance of the assessee in the negative and in favour of the assessee.
20. The reference is disposed of accordingly. There will be no order as to costs.
Monjula Bose, J.
21. I agree.